The markets are down! What’s going to happen to my super? What do I do?

Welcome to 2016!  We’re only 2 weeks in and already the media have been reporting large falls on Australian and Global stock markets.  And they’re right, the Australian stock market (as I write this) is currently sitting at almost the exact levels of 10 years ago.

So what does that mean for your super fund and how can you take advantage of this situation?  Most people have exposure to the stock market through their super funds, particularly if you’re invested in a balanced or growth option within a retail super fund (Sunsuper, Australian Super, AMP the list is almost endless). 

The reality is, the level of the market is only of concern if you need to access your funds. So unless you’re approaching retirement, it’s not really an issue.  Markets will recover, they always do, it’s just a matter of time.  There is however a massive opportunity with market levels so low.  There have only been a handful of times over the past century where markets have been at or below the levels they were 10 years prior.  The clock has been turned back so you can now invest in markets via your super at 2006 prices!  Imagine being able to do that with the new car you’ve been wanting or even a house.

So what can we do?  What do smart investors do?  Well, if you do nothing your super will slowly recover as markets recover, and for some that may be the best thing.  However, depending on your age and investor profile, you can accelerate the recovery through the use of internally geared funds.  You’ll recall my post of December 21 How to get the best out of your Super – Internally Geared Funds. These funds invest in the Australian stock market.  However, they have an internal gearing/leveraging mechanism that amplifies returns (and losses) by approximately 50%. 

So if the market drops 10%, they go down 15% however if it goes up 10% they go up 15%.  Given the current level of markets, much of the downside risk has been removed.  Markets are already significantly down.  Does this mean they won’t drop further?  Of course not, they could very well do that however you’ll never pick the bottom.  The best you can do is recognise that markets are already significantly discounted and they will recover.

Do you simply leave your super as is and be content with mediocre gains, or do you restructure, give consideration to the use of internally geared funds and enjoy accelerated returns in your super as markets recover?  The choice is yours.

At the very least, it’s worth a discussion.  If you have a number of funds, now may be the time to consolidate them all into the one high performing fund. The above may not be for everyone and it’s not to be taken as advice, but for the sake of an hour of your time and a coffee it should be considered.

Andrew O'Brien. FINANCIAL ADVISER. P 07 3852 3025  M 0403 156 625  E andrew@hindsightwealth.com A Suite 4 / 30 Florence Street, Newstead QLD 4006. To view our Privacy Policy, click here.

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